Bank of Israel Shifts Some Reserves to German Stocks

Oct. 22 (Bloomberg) -- The Bank of Israel’s monetary policy
committee decided to increase the amount of the institution’s
foreign reserves invested in German equities at the expense of
its U.S. stocks portfolio.

The committee, in an Oct. 1 vote, approved the transfer of
0.5 percent of the central bank’s reserves, which stood at a
record high $79.9 billion at the end of September, to German
equities from U.S. stocks. Before the change, 4.7 percent of the
reserves were invested in the U.S., 0.24 percent each in Germany
and France, and 0.5 percent in the U.K., according to a
statement posted on the central bank’s website.

“The market operations department believes that under the
current conditions in global capital markets, shifting part of
the portfolio to investment in Germany conforms with the
department’s portfolio management objectives,” the bank said in
the statement. “The proposed change isn’t expected to affect
the reserves portfolio’s overall level of risk.”

Central banks around the world are looking for alternatives
to holding government bonds as yields remain low. In the month
before the Bank of Israel decision, Germany’s benchmark DAX
Index rose about 6 percent, double the gain of the S&P 500 Index
during the same period. The German index rose today by 1 percent
to 8,951.33 at 5:08 p.m. in Frankfurt.

The statement didn’t say whether the change had already
been made, and a bank spokesman wouldn’t comment.

Lone Dissenter

The monetary policy committee voted four to one in favor of
the new investment mix. The lone dissenter reasoned that the
bank should wait until the end of the year, when the panel would
hear the department’s comprehensive proposal for asset
allocation, the statement said.

The central bank began investing a portion of its foreign
currency reserves in U.S. equities in March 2012 to diversify,
reduce risk and improve performance, Barry Topf, a member of the
monetary committee, said. Initially, 3 percent of the reserves
portfolio was invested in U.S. equities. Since then, the
monetary policy committee has expanded to other markets and
increased the proportion of the reserves available for
investment to 6 percent.